European energy giant RWE has agreed to sell its oil and gas arm DEA to the Russian LetterOne Group, led by tycoon Michael Fridman, for $7 billion. The deal comes despite warnings from Chancellor Merkel Russia faces a “catastrophe” if it annexes Crimea.

After the deal is finalized later this year it will be one of the
priciest for Russian business, according to RBC.

At the moment it is “subject to the approval of the
Supervisory Board of RWE AG and of authorities in several
countries,” says the RWE press release. Further details will be
clarified shortly in order to enter into the sale and purchase
agreement.

RWE has been struggling to improve financially, as earlier this
month the company reported its first net loss since 1949. On top
of that, the company’s debt pile has risen to 30 billion euro,
which pushed RWE to start cutting jobs and selling assets.

The energy deal between Russia and Germany effectively shows that
political tension between Russia and the West over Ukraine and
Crimea has little to do with real business. The leaders of the US
and the EU are gathering on Monday in Brussels to discuss
sanctions against Russia. They are largely expected to be limited
to visa bans and an asset freeze for some of Russia’s leading
officials, not corporate assets.

The DEA AG oil and gas company is one of the top 5 energy
concerns of Europe, and has about 190 licenses and concession
agreements on oil and gas production in Europe, the Middle East
and North Africa, some of which are unable to function and demand
large investment.

The company has business in 14 countries, including the UK,
Germany, Norway and Libya, and has 1400 staff. In 2012 DEA AG
accounted for 11 percent of RWE, which makes it worth around $588
million.

The LetterOne Group was created by Russian businessman Mikhail
Fridman in June, 2013 especially for oil and gas sector
investments. The company is headed by the former chief executive
of TNK-BP and the co-owner of "Alfa Group" German Khan.

In another Russian-European deal announced Monday, the world’s
biggest listed oil company Rosneft said it would acquire a 26.19
percent indirect stake in Italian tyre maker Pirelli. Russia’s
top oil producer will own 50 percent of a new company that will
buy Camfin’s stake in Pirelli, according to Reuters. The other 50
percent of the new company will belong to a company 80-percent
owned by current Pirelli indirect shareholder Nuove
Partecipazioni.

German interest

On Friday Chancellor Angela Merkel repeated Germany would limit
business ties with Russia over Russian action in Ukraine, though
adding that sanctions would be a last resort.

Germany has grown into Russia’s most important business partner
in the west, with the trade turnover estimated at 80.5 billion
euros ($111 billion) in 2012. However, due to the worsening
political situation with Ukraine the figure fell to 76.5 billion
euros ($105 billion) in 2013.

Among the German companies operating in Russia is the energy
giant Wintershall, which was the first to help produce gas in
Western Siberia. The chemical maker BASF also owns a 15 percent
stake in the South Stream pipeline, which will deliver Russian
gas to central Europe via the Black Sea and the Balkans.

Most recently, the EU policymakers put South Stream on hold, as Russia is embroiled in the diplomatic
crossfire with the West over Ukraine and Crimea.

Carmaker Daimler that sells Mercedes-Benzes to Russian tycoons
and engineering company Siemens also have wide presence in
Russia, but they support Ms. Merkel's approach to the Ukraine
crisis even as they voice concern about sanctions